Focus on Your Strengths
While entrepreneurs often assume every role in their companies, they certainly are not experts in everything. Entrepreneurs cannot be expected to serve effectively in finance, sales, legal, capital raising, and CEO roles… even if there was time in the day to do so! No person is equipped with all of the requisite knowledge and skill. By the same token, entrepreneurs do not have unlimited funds to burn on additional staff or consultants. Money spent to acquire expertise comes at the expense of other core needs.
The Role of an Advisory Board
For these reasons, many entrepreneurs build advisory boards with experienced individuals who can fill gaps of knowledge as well as assist in other company efforts. To be clear, advisory board members will not dedicate a majority of their professional efforts on behalf of your company. Instead, advisory board members offer advice, counseling, credibility, and/or introductions on a regularly scheduled basis to improve your company’s performance and growth.
Building an Advisory Board
Building an advisory board is certainly easier than creating a product and executing a business plan. Yet it takes an evaluation of your company’s needs, and a degree of people skills, that make this task harder than it sounds. Here are some guidelines to follow:
- Advisors Can Be Found Everywhere. Business networking often boils down to kissing many frogs and then following up with the princes. This is no different. Because you are probably looking for a variety of people with a variety of skills, it is no surprise that potential advisors can range from neighbors, to fellow worshipers, to people you have met during your commute.
- Advisors Cannot Come With Emotional Baggage. Never ask family members or close friends to serve on your advisory board. All too often, one of the following two problems arise: (1) advisors do not want to hurt your feelings, so they are far less than candid; or (2) candid advice triggers negative emotions from events that were unrelated to business whatsoever. That being said, certainly feel free to ask your family and friends for introductions to potential advisors.
- Do Not Burn Cash. Because advisors are not devoting a significant amount of time to your business, they do not deserve a cent of your personal start-up funds or investor’s funds. Nor do they deserve significant chunks of equity. Rather, offer options to be exercised many years out or accelerated upon an exit.
- Fire Bad Advisors. You are not stuck with these people! Make the executive decision, cut your losses and move on. While this is harsh, it is no different than other decisions that need to be made.
Exercise Common Sense
Focusing on substance, needs, and willingness to commit will never let you down, including in the selection of advisory board members. Unfortunately, too many business owners are drawn to the idea of certain people or acquiring cachet on the cheap. Don’t be the squirrel who chases anything that looks shiny—exercising common sense in a particular direction should be fine.
David Seidman is a partner in the law firm of Hecht & Seidman, LLC located in Northbrook, Illinois. There he serves as outside general counsel to start-up, small, and medium size businesses. David also serves on the Advisory Board of several companies including Freenters and CollegeAnnex for whom he will not provide legal advice. You can reach him at [email protected]